Do you trust unemployment numbers?
It's no secret that I don't pray to the statistical gods. There is just way too much that gets lost in translation and transition between eternally tardy numerical data and real time.
That having been said, a a statistic I pay close attention to gives us signs for optimism today...or does it?
Unemployment numbers seem to have a more direct correlation to financial markets today than they have since the Depression or at least the late 70's. Yes I know, master of the obvious...but only more reason to keep a closer eye on the subject and delve deeper into its forecasting potential.
For the week ending October 23rd, unemployment claims dropped 21,000 to a seasonally adjusted figure of 434,000. This was the second-lowest number for the year and (really) the most encouraging considering that the lowest previous figure came from the week of July 10th when state unemployment offices were shut down.
Sadly, however, a fall in unemployment claims does not signal an uptick in hiring. Economists estimate the economy needs to grow 5% for an entire year to shave a single percent off the unemployment rate. Seemingly unrealistic from today's vantage point.
So what is really happening and what should we expect in regards to markets as the year draws to a close?
A telling though certainly melancholy indicator comes from a look at the calendar. This year Congress extended unemployment benefits for some to an unprecedented 99 weeks. Mid-November of 2008 was roughly 99 weeks ago. Perhaps the decrease in unemployment numbers just means we've reached the point where people no longer even have that crutch to lean on anymore.
I would like to agree with many who feel we will see a rise in employment following the mid-term elections. I would like to believe that the record cash piles sat upon by American corporations will lead to an eventual hiring burst. I would also like to believe the tooth fairy will bring me some more Vicodin for these bleeding gums of mine.
I will hold off on my usual slamming of unemployment benefits, which act as a band aid attempting to stop an arterial hemorrhage.
I will hope that maybe with the oncoming holiday season, costumes, turkeys, santas, elections and elves maybe some of these numbers eventually lead to growth.
I will just be doubtful of my hopes along the road to recovery.
Midas,
I don't beleive the BLS statistics at all. I gave up trusting them a while ago. The fact is, there are three considerations you haven't acknowledged in your post.
1) You don't bring up the differential between the U3 rate, which the BLS supposedly uses, and a more accurate U5 or U6 rate. The U5/U6 rates would be much more indicative of the true rate of unemployment.
2) How many revisions has the BLS put out because of their incorrect figures? The BLS has repeatedly revised their figures to the downside because they are incorrect.
3) We only look at first term unemployment, and not at anything else. The BLS does not actively report the full benefit spectrum, meaning people on T2/First term EUC Benefits through T4/Third Term EUC benefits are not noticed comparatively, nor are they commonly discussed when you hear the BLS report.
And no, the final quarter will not see much gain in terms of true employment, as the bulk will be temporary and seasonal work. Temporary hope does not make for good things when the reality finally sets in.
Yeah, Gov. numbers are always underestimates of the true figures. I do think the economy is moving along with slow hiring, but people always want a magic elixir. Sometimes you just have to wait things out. Might not be popular, but we seriously fucked this economy up and it is going to take time to heal the wounds.
I just want to say this. The government puts out shit numbers, can't be trusted to be accurate or transparent, wikileaks is showing all kinds of shit, Rangel is investigates along with a long list of Congressmen and women yet people are OK with the government getting more money and expanding? What a duality.
Government should be smaller to reduce its fuck up effect. I know how to spend my money better than a large group of elected thieves.
I don't trust the NFP survey. I do trust weekly claims reports. From my knowledge (I think it was mentioned in the Gartman Letter one morning), the weekly claims figures are accurate because the government actually has to make payouts as a result. Because of this, they tend to be more accurate (though not perfect).
Frieds,
You are right, the BLS NFP numbers tend to suck. But I don't think those are the numbers MMM is talking about here.
Whether or not the numbers are accurate and trust worthy, they move the market.
the numbers are flawed but i believe they are an honest attempt...ie i dont think they are intentionally manipulated. I just think that attempting to make a good estimate of employment in a country of 300MM is virtually impossible. Private attempts such as the ADP report are just as bad. And complaining about the #'s is really a waste of time...the market trades the number and thats the way it is.
And i agree with anthony that incompetence of govt is a reason to give it less not more money. One of the amazing things about government vs private industry is that in government when an agency fucks up it gets more money whereas in private industry you get your funding pulled when you fuck up. Failure is rewarded in the public sector.
I trust the unemployment numbers about as much as I trust the CPI numbers :P.
I believe that the U6 unemployment numbers are the most reliable of the government's #'s . However, they have a clear agenda to underestimate unemployment and inflation while overestimating GDP growth to lower the real cost of social programs and for politicians to get themselves re-elected.
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